Highlights from the archives
A sneak peak at our Filings of Interest reports
We’re great at extracting interesting red flags and our institutional clients receive weekly emails highlighting some of the most interesting red flags of the previous week as highlighted by our algorithms.
We are a Y Combinator company - announced yesterday in Institutional Investor! To celebrate, we wanted to share some of our favorite disclosures over the past few months. Our Red Flag guide may come in handy as you read through these disclosures.
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9F INC (JFU) - 20-F
The audit committee has voted to change auditors twice within the three months ending May 2021, from Deloitte to MarcumBP for the 2020 audit, and from MarcumBP to WWC for 2021.
The company’s (former) auditors, MarcumBP, identified three new material weaknesses in internal controls:
Lack of accounting personnel with sufficient expertise to address complex accounting issues.
Lack of timely detailed account analysis and reconciliation in the company’s close processes.
Lack of documentation of internal control policies and of critical accounting estimates and procedures.
9F has valuation allowance of RMB 2B relating to a former partner in their direct lending program, PICC Property and Casualty Company Limited Guangdong Branch (“PICC”). 9F and PICC have outstanding counterclaim against each other.
The company ceased operations of their loan facilitation program during 2020, which accounted for 79% and 14% of Net revenues in 2019 and 2020, respectively. The dispute with PICC is cited as a partial reason for the cessation of the loan facilitation business.
QUOTIENT LTD (QTNT) - 10-K
Multiple key executives have resigned:
COO resigned December 21, 2020
Head of Financial Accounting and Treasury (principal accounting officer) resigned February 1, 2021
CEO resigned April 1, 2021.
The company recognized impairments of $2.3M on certain short-terms investments through Credit Suisse supply-chain finance funds, following suspension of redemption of the funds and indication from Credit Suisse that losses should be assumed.
The company has a material weakness in internal controls for interim statements, due to a failure to appropriately classify indebtedness as current. The control weakness was considered remediated for the annual filing.
ALTEROLA BIOTECH INC (ABTI) - 10-Q
The company has made a strategic decision to change business direction, pivoting from providing chewing gum delivery systems to developing cannabinoid pharmaceutical ingredients and bulk ingredients for the cosmetics industry.
The company continues to disclose substantial doubt on their ability to continue as a going concern, and unremediated material weaknesses internal control.
DXC TECHNOLOGY CO (DXC) - 10-K
DXC has amended their sale of receivables facility during the year, eliminating the deferred purchase price (DPP) component and recognizing sale of receivables immediately upon sale of receivable to the purchaser. Prior to this amendment, DPPs were recognized on the ultimate collection of the underlying receivables and recorded as cash flows from investing activities.
At March 31, 2021, the company was overextended on their sale of receivables facility by $40M.
The company continues to report unremediated weaknesses in internal controls relating to policies and procedures for complex transactions and processes.
NEW FRONTIER HEALTH CORP (NFH) - 20-F
The company disposed of 80% of their interest in a subsidiary to a related party.
The company acquired Shanghai Precision from an affiliate of New Frontier Group and an unrelated party for RMB 29.6M. Part of the purchase price was repaid through related party loans.
In February 2021, the company received a non-binding proposal to ‘go private’ from affiliated entities at US$12 per share.
Let us know if you’ve enjoyed the highlights.
Until next time, keep reading statements and finding the things companies don’t want you to see.
The Bedrock AI Team